An Apology Worth $50B

BRB Bottomline: This apology is worth $50B. Worth more, considering its impact on the global economy. Unquantifiable, for all the comfort women still alive reliving memories that haunt them still.

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The antagonistic relationship between the two nations began back in 1910 when Japan colonized South Korea. Japanese oppression pushed Korean men into forced labor, required every Korean to rename themselves in Japanese, and punished Koreans for speaking Korean. During WWII, Japanese occupation grew worse when Japan objectified Korean women as their “comfort women”—a translation of the Japanese ianfu, euphemistic for “prostitute”—under the name of soldier motivation. Innocent teenagers were taken away from their homes and raped by Japanese soldiers. The conflict reached its peak in 2019 when the Abe administration refused to apologize for their wrongdoings in the past and instead offered pocket money to the South Korean government. Then the trade war began.

According to the 2019 report provided by the Korean Economics Research Institute (KERI), it is estimated that the ongoing trade war between Japan and South Korea has the potential to drop Japan’s GDP by 3.0% and South Korea’s by 5.4% in 2020. This cuts the GDP by $31.57B and $17.55B for Japan and South Korea respectively, costing them an accumulated value of approximately $50B. The reasons for such a significant blow? Trade sanctions and boycotts.

Japan first prevented local firms from exporting chemicals necessary in producing semiconductors, which caused Korean technology companies to fail in meeting their production deadlines. Furthermore, Japan took South Korea off their list of trusted trading partners, implying that they have no intention of yielding but that this trade war will be a long and fraught conflict. South Korea struck back by taking retaliatory measures. Responding to Japanese sanctions, they stopped exporting semiconductors to Japan. For another, Korean supermarkets and convenience stores have been continuously taking Japanese beers off their shelves; according to Japan’s finance ministry, exports of beer from Japan to South Korea fell 99.9% year-on-year due to boycotts. To make the situation worse for Japan, mutually agreed upon boycotts in Korea on products and services from Japanese companies are also leading to a plunge in sales. Though numerous economists did not expect these measures to have a significant macroeconomic impact, both countries, especially Japan, are seeing the worst of the economic repercussions.

Image 1: South Koreans protesting in front of the Japanese embassy regarding  Japanese oppression during colonization and new trade restrictions.

The issue of the Korean-Japanese trade war became more pronounced in the international arena after politicians got involved. According to South China Morning Post, South Korean President Moon Jae-In spoke of Japan’s intention to “attack and hurt” the Korean economy and said, “We will never lose to Japan.” The Japanese Prime Minister Shinzo Abe responded by further exacerbating the conflict through the implementation of nationalist protective policies. As such, this may seem like a conflict revolving around the factors of international trades on the surface, but it also deeply intersects with variables in business and politics.

In addressing the issue, both countries first need to understand the intricacies of international relations and their history regarding the trade war such as how it affects public opinions and relationships between nations. They also need to understand the psychological aspects of the games of chicken between politicians regarding this matter. For instance, the retaliatory moves taken in Korea in the form of “Do Not Buy from Japan” movement—in response to some of the hostile nationalist policies implemented by the Japanese government—can be understood best from sociological and psychological perspectives rather than from an economic standpoint. Furthermore, policymakers need to understand the macroeconomic, business aspects that are intertwined with this issue. Innocent bystanders have been getting hurt; for instance, the boycotts heavily impacted the sales of 7-Eleven just because many Koreans thought the firm was Japanese, despite the fact that it is an American company. For them, the trade war could be equated to a selfish political dispute with unjustifiable actions taken by both governments.

The bigger problem is that the trade war between Japan and South Korea is not a localized conflict; it concerns the global economy. For instance and as aforementioned, South Korea’s main exports are semiconductors, and coincidentally or not, Japan’s main exports are the chemicals needed to produce semiconductors. As the trade war continues to intensify and remain unresolved, the global supply of semiconductors will continue to take a major cut and a great number of firms globally will have a difficult time meeting their demand for semiconductors. If it remains unresolved, the trade war between the two will cause a major headache for global economies.